On June 23 the UK public will choose to either redraw their place in the world by leaving the EU or to remain within the EU under a modified set of terms recently secured by Prime Minister David Cameron.
When assessing the success of these negotiations then, the key issue is how effectively (or otherwise) the concessions won address UK voters’ three main concerns about the EU: migration, The City of London and sovereignty.
In this sense, the most pertinent parts of the UK’s new deal are those that provide for:
- A temporary ‘emergency brake’ on EU-migrants claiming UK in-work benefits
- Limitations on UK child welfare payments to children outside the UK
- An ability for the UK to send Eurozone legislation it doesn’t like back to EU leaders, and
- Explicit acknowledgement that the UK is not committed to further political integration.
The ‘emergency brake’
If the UK remains in the EU it, along with any other EU member state, will have a seven year window within which it can limit newly migrated EU citizens’ access to in-work benefits (such as tax credits for low income workers). In each instance the limitations can last up to four years. This provides the UK with some respite from increasing welfare claims during a period of time when public spending cuts should hit their peak and the politically important goal of a budget surplus should be reached.
However, it is a temporary measure, it would not apply to migrants already in the UK, and benefits must be phased in over the four year brake period. Most significantly, it does not provide a direct control on migrant numbers. As a result this concession seems unlikely to assuage UK voters’ concerns about rising migration. It also falls well short of the outright ban on in-work benefits promised in last year’s Tory manifesto.
From 2020 child benefits paid to parents working in the UK for children living in other EU states will be indexed to living costs in the state where the child resides. Similar to the emergency brake, this is another concession that attempts to address the issue of migration indirectly by limiting its impact (especially how much it costs) rather than the actual numbers entering the country. It is also a marked watering down of the initial goal (and manifesto pledge) of stopping all UK child benefit payments to children outside the UK. However, it is more of a political issue than an economic one as the sums involved are believed to (at least currently) be quite small.
A special relationship
New regulation will mean that the UK, and the UK alone as a non-Eurozone country, will be able to send new Eurozone regulations it views as ‘problematic’ (perhaps regarding the City of London) to a further round of discussion amongst the leaders of all 28 EU nations (including the UK). Of course there is no guarantee that such discussions would lead to a more favourable outcome. But, on the other hand, this would give the UK greater influence on Eurozone policy setting and this influence would be unique to the UK as a non-Eurozone country.
It’s not a slam dunk, but a qualified victory. The Remain campaign should be able to make political capital out of securing such a unique position. It doesn’t provide bulletproof safeguards for the City, but with enough political spin it may be close enough for most.
Explicit exemption from closer union
At the next opportunity, EU treaties will be amended to explicitly exempt the UK from the goal of ‘ever closer union’. This is easily the clearest victory for those wanting the UK to remain in the EU. While it does not bring any powers already ceded back from the EU, it unambiguously addresses voter’s concerns about further erosion of sovereignty. By virtue of being exclusive to the UK, it could also be read as another tacit admission of the UK’s importance to Europe.
Mr Cameron’s new European deal is a mixed bag rather than a knock-out blow. It comprehensively addresses concerns about further erosion of sovereignty, provides some comfort for the City but stops well short of firm protections, and it does little if anything to limit migration. Looking at it in a different light, supporters might praise it for restricting any further integration but detractors will insist it doesn’t go far enough and fails to regain any powers already ceded. Given that each concession had to be agreed by all 28 member states, it probably shouldn’t be surprising that the least progress was made in areas where other states (especially those of the Visegrad Group: the Czech Republic, Hungary, Poland and Slovakia) had the most to lose.
Overall, the concessions secured should enable the Remain campaign to present a vision of a future within the EU that is different to the past and on average provides more of what opinion polls (and last year’s general election) suggest the UK public want. Paired with a major political campaign it should contain enough to make the vote on 23 June a much closer contest.
In Part 3 of our Brexit blog we look at current public opinion in the UK and make an early attempt to gauge the likely outcome. Part 1 is found here.
Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.